Question

Exercise 5-1 The Effect of Changes in Activity on Net Operating Income (LO5-1) Whirly Corporation's contribution format income statement for the most recent month is shown below. Sales (7,eee units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 217,eee 133,eee 84, eee 54,500 $ 29,500 Per Unit $31.00 19.ee $12.00 Required: (Consider each case independently) 1. What would be the revised net operating income per month if the sales volume increases by 90 units? 2. What would be the revised net operating income per month if the sales volume decreases by 90 units? 3. What would be the revised net operating income per month if the sales volume is 6.000 units?

Answer 1

Solution:

1. Net Operating Income if Sales volume increased by 90 units

Particulars	Total Cost $	Cost per unit $
Sales (7,090 units) Less: Variable          Contribution Margin Less: Fixed Expense           Net Operating Income	219,790 134,710	31.00 19.00
	85,080 54,500	12.00
	30,580

2. Net Operating Income if Sales volume decreased by 90 units

Particulars	Total Cost $	Cost per unit $
Sales (6,910 units) Less: Variable          Contribution Margin Less: Fixed Expense           Net Operating Income	214,210 131,290	31.00 19.00
	82,920 54,500	12.00
	28,420

3. Net Operating Income if Sales volume is 6,000 units

Particulars	Total Cost $	Cost per unit $
Sales (6,000 units) Less: Variable          Contribution Margin Less: Fixed Expense           Net Operating Income	186,000 114,000	31.00 19.00
	72,000 54,500	12.00
	17,500